Thursday, July 28, 2011

Arranging health insurance as a couple can be a challenging proposition

Arranging health insurance as a couple can be a challenging proposition as there are two sets of needs being taken into consideration when deciding how extensive your coverage should be. Here’s what you need to know if you’re thinking about taking health insurance as a couple.

There is less hassle involved in comparison to taking out two separate singles policies. You’ve only got the one policy to manage with one set of premiums and if a claim needs to be made, you only need to do this on the one policy. Because these type of policies are aimed directly at couples, you can make savings in comparison to both having policies that lean more towards individuals.

Lifetime Health Cover

Lifetime Health Cover (LHC) allows you to lock in base rate premiums if you take out private hospital cover before July 1st following your 31st birthday (otherwise known as your base date). If you take out private hospital cover after this, loading fees of 2 per cent are added onto your premiums. As a couple, the situation can be complicated if both partners have different LHC loadings:

If only one partner has had continuous hospital cover since their base date (and the other has LHC loading)

Your combined premiums will work out as an average between the base rate premium and the LHC loading. For example, if one of you has no LHC loading but one of you has a LHC loading of 4 per cent, your premiums as a couple will average out at 2 per cent.

If both partners have LHC loadings

If you’ve both got LHC loadings, your premiums are the average of the two loadings. For example, if you have a loading of 4 per cent while your partner has a loading of 6 per cent, your combined loading will be 5 per cent.

If you’ve both taken out private hospital cover before your base date, you can often still switch to couples insurance without compromising your base rate premiums.
The Medical Levy Surcharge & The Rebate

Most Australian taxpayers pay a 1.5 per cent Medicare levy but if you’re a higher earner who hasn’t arranged hospital cover with a registered health fund , you’re also subject to an additional Medicare Levy Surcharge (MLS). The income threshold for the 2010/11 financial year was $154,000 for couples or families and will change to $160,000 for the 2011/12 financial year. The surcharge was previously set at 1 per cent but in line with plans to means-test both the MLS and the health insurance rebate from July 2011, both will operate on a sliding scale.

For couples/ families who have a joint income of below $150,000, the 30 per cent rebate should be unaffected (35 per cent for those aged 65-69 and 40 per cent if you’re over 70) and you won’t pay an MLS charge.
For couples/families who earn between $150,001 and $180,000, the rebate decreases to 20 per cent (25 per cent for those aged between 65 and 69 and 30 per cent for those over 70) and the MLS charge is 1 per cent.
For couples/families who earn between $180,001 and $240,000, the rebate decreases to 10 per cent (15 per cent for those aged between 65 and 69 and 20 per cent for those over 70) and the MLS charge is 1.25 per cent.
For couples/families who earn over $240,000, no rebate will be on offer and the MLS charge is 1.5 per cent.

If the proposed changes to the MLS make you think twice about taking out hospital cover or keeping your existing cover, think about the potential downsides if you do drop your hospital cover. Private health insurance has several key benefits that you may well miss if you ditch it. It’s much more extensive than Medicare benefits alone, has shorter waiting times attached and doesn’t require you to wait around for a bed to become available in a public hospital.
If You’re Planning a Family

Bear in mind that most health funds impose a 12-month waiting period before you can access the benefits so it’s no good waiting until you’re pregnant before you look for appropriate coverage. If you start your search some time before you think you’ll need the cover, there’s a good chance that you’ll have already served out your waiting period and will be able to access the full benefits.

It may be better to switch to family cover after a first pregnancy is confirmed so that the baby is covered after the birth. For some health funds, you may need to have been paying premiums for family cover for several months prior to the birth to ensure that this will definitely be the case but check with your health fund to confirm their position.

If you’re planning to start a family in the not-so-distant future, there may be other things to take into consideration when choosing your health insurance policy.

If you’re a cohabiting couple, it can be cheaper to arrange couples insurance that features both of you on the same policy. For hospital cover, Lifetime Health Cover loadings can complicate how much you’ll pay if you’ve waited beyond your base date to take it out. If you’ve yet to take out hospital cover at all, the Medical Levy Surcharge is intended as a big incentive for couples in the higher earning brackets as it enables you to avoid the additional tax.

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